Celgene Corp.'s aggressive business development activity continued this week with the $7.2 billion offer for Receptos Inc., which would add the highly touted late-stage S1P modulator ozanimod to its immunology and inflammatory franchise and raise the Summit, N.J.-based biotech's 2020 guidance to $21 billion-plus.

As analysts and investors digested the news, which came somewhat unexpectedly after market close Tuesday, the reviews were nearly all positive, with ozanimod and its estimated peak $4 billion to $6 billion opportunity in the combined multiple sclerosis (MS) and ulcerative colitis (UC) markets views as a largely derisked asset to help offset generic threats to Celgene's primary seller, Revlimid (lenalidomide), set to go off patent in the U.S. in 2027, or possibly earlier if generics makers prevail in patent litigation against the blood cancer drug.

While a few skeptic grumbles were heard, mostly on the $232-per-share offer's modest premium – a 17 percent premium to Monday's closing price and a 12 percent premium to Tuesday's close – no one could deny Receptos' meteoric stock rise since pricing its IPO in 2013 at a mere $14 per share. (See BioWorld Today, May 10, 2013.)

The San Diego-based company's shares (NASDAQ:RCPT) have been steadily rising, particularly after data from the phase II portion of the phase II/III RADIANCE trial in relapsing MS were presented at the joint ACTRIMS-ECTRIMS meeting in September, followed a month later by impressive phase II data from the TOUCHSTONE trial, demonstrating that ozanimod met primary and secondary endpoints in UC patients, with no safety issues. Since the end of October, the stock has jumped a whopping 110 percent. (See BioWorld Today, Sept. 15, 2014, and Oct. 29, 2014.)

In other words, "we believe investors had already widely anticipated a buyout" of Receptos, Leerink Research analyst Howard Liang wrote in a research note.

Shares of both companies were trading up on the news Tuesday, with Celgene's stock (NASDAQ:CELG) closing at $131.39, up $8.54, and shares of Receptos (NASDAQ:RCPT) ending the day at $230.08, up $22.90.

The latest move comes only two weeks after Celgene raised a few eyebrows with its deal valued at about $1 billion with T-cell therapy specialist Juno Therapeutics Inc. Payments included $150 million in up-front cash plus the purchase of about 9.1 million June shares priced at $93 each. (See BioWorld Today, June 30, 2015.)

Other recent agreements include an option deal last month to access Lycera Corp.'s preclinical RORgamma agonists for cancer immunotherapy and a clinical-stage candidate, LYC-30937, in development for inflammatory bowel disease. In April, Celgene exercised an option to acquire Versant Ventures portfolio company Quanticel Pharmaceuticals Inc. for $100 million up front and up to $385 million in milestones, and licensed rights from Astrazeneca plc to develop MEDI4736, an anti-PD-L1 antibody, in hematological cancers in return for a $450 million up-front payment. (See BioWorld Today, April 27, 2015, April 28, 2015, and June 10, 2015.)

The back-to-back dealmaking even prompted Cowen and Co. analyst Eric Schmidt to ask on the conference call whether the activity is "the new norm for Celgene?"

Chairman and CEO Bob Hugin replied that the firm had been "extremely fortunate" to identify and act on "several major transactions that really position us for . . . sustained long-term growth." He acknowledged there would involve "some work to absorb these" deals, but "on the other hand, we want to make sure we continue to build for the future."

FORAY INTO MS?

Of all the deals done this year, the Receptos addition offers Celgene the most near-term prospect in ozanimod (formerly RPC1063). MS trials RADIANCE and SUNBEAM are expected to read out in the first half of 2017, with potential approval in 2018, while the phase III TRUE NORTH trial recently began enrolling UC patients, with data expected in 2018.

The UC indication is an obvious strategic fit for the firm, which boasts an existing inflammation and immunology franchise including commercialized product Otezla (apremilast), an oral phosphodieasterase-4 inhibitor approved in March 2014 for adults with active psoriatic arthritis, and late-stage candidate GED-0301, an oral antisense DNA oligonucleotide targeting Smad7 mRNA for treating moderate to severe Crohn's disease. Beyond that, there is an earlier-stage pipeline, with nine phase II programs "in a variety of important indications" expected to launch before year-end, said Scott Smith, global head of inflammation and immunology.

But MS marks a new space for Celgene, sort of.

"From my perspective, we look for opportunities where products can be differentiated," said Hugin, adding that "we do have a number of people who have worked in this specific space."

Celgene also has experience building out a global specialty markets infrastructure, as it did with Revlimid. It's prepared to do the same with ozanimod in MS, though a partnership in that indication could also be a possibility.

"We have optionality," Hugin added. "And we have time, as we advance the clinical program, to make those decisions. If the data continue to be differentiated, I think we'll be very aggressive to build this out to our full capabilities."

Receptos, and now Celgene, looks to position ozanimod as a best-in-class option against Novartis AG's approved S1P drug Gilenya (fingolimod), particularly in terms of an improved safety profile. Data to date have shown ozanimod might come with less cardiovascular and liver toxicity, though no head-to-head comparison studies have been conducted.

In MS, there's a need for additional therapies to improve the rate of relapse" and improve safety and tolerability, said Mark Kreston, corporate vice president, global marketing of inflammation and immunology. Oral therapies, in particular are expected to take over the larger share of the MS space, he added, estimating that the market for oral MS therapies will triple from the current $6 billion in sales to between $15 billion and $20 billion by 2020.

Gilenya sales totaled about $2.5 billion in 2014, and could bode well for ozanimod's potential. In fact, Deutsche Bank analyst Robyn Karnauskas wrote in a research note that "we believe the MS opportunity alone could be enough to justify the price paid," calling the UC opportunity a "free call option."

Cowen's Schmidt, however, considers UC "likely the higher value opportunity for ozanimod, given the dearth of treatment options" and Celgene's growing franchise in inflammatory bowel disorders.

In UC, ozanimod would be a first-in-class option in an indication largely limited to injectable therapies such as anti-TNF drug Humira (adalimumab). The drug also could have potential in Crohn's disease down the road, even, the company suggested, becoming part of a combo or sequential regimen with GED-301.

RAISING 2020 GUIDANCE

Celgene expects to finance the Receptos deal through a mix of new debt and cash, said Peter Kellogg, chief financial officer, who guided for adjusted earnings per share (EPS) impact of 40 cents and 25 cents for 2016 and 2017, respectively. The deal would be accretive beginning in 2019.

Assuming all goes as planned, the transaction is set to close in the third quarter, with Celgene retaining a "strong enough balance sheet" so that it will "continue to have financial flexibility to additional internal and external developments," Kellogg said.

The company will report detailed second quarter earnings July 23, but it disclosed preliminary net product sales of $2.25 billion Tuesday, a 22 percent increase over the same period in 2014. Total revenue also increased 22 percent to about $2.28 billion. The biotech said its adjusted diluted EPS for the quarter increased 37 percent to about $1.23.

Its 2015 guidance reaffirms net product sales in the range of $9 billion to $9.5 billion and raises its adjusted diluted EPS for the year to a range of $4.75 to $4.85.

The company also is increasing its 2020 net product sales to exceed $21 billion. Celgene previously guided for 2020 sales exceeding $20 billion. (See BioWorld Today, Jan. 13, 2015.)